Judge: Mark A. Young, Case: 19SMCV01709, Date: 2024-07-10 Tentative Ruling

Case Number: 19SMCV01709    Hearing Date: July 10, 2024    Dept: M

CASE NAME:           City National Bank v. Law Offices of Jeremy Tenser Ltd., et al.

CASE NO.:                19SMCV01709

MOTION:                  Motion to Quash Service of Summons

HEARING DATE:   7/11/2024

Legal Standard

“A defendant . . . may serve and file a notice of motion for one or more of the following purposes:  (1) To quash service of summons on the ground of lack of jurisdiction of the court over him or her. . . .”  (CCP § 418.10(a).) A court lacks jurisdiction over a party if there has not been proper service of process. (Ruttenberg v. Ruttenberg (1997) 53 Cal.App.4th 801, 808.) “When a motion to quash is properly brought, the burden of proof is placed upon the plaintiff to establish the facts of jurisdiction by a preponderance of the evidence.” (Aquila, Inc. v. Sup. Ct. (2007) 148 Cal.App.4th 556, 568.)

“[C]ompliance with the statutory procedures for service of process is essential to establish personal jurisdiction. [Citation.]” (Dill v. Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1444.) “[T]he filing of a proof of service creates a rebuttable presumption that the service was proper” but only if it “complies with the statutory requirements regarding such proofs.” (Id. at 1441-1442.)

Analysis

Specially Appearing Cross-Defendants Royal Bank of Canada (“RBC”), RBC Bank (Georgia) N.A. (“RBC Bank”), David McKay (“McKay”) and Maria Douvas (“Douvas”) (together, the “RBC Parties”) move to quash the service of summons for lack of personal jurisdiction and for failure to comply with the statutory procedures for service of process with international law.

Due process permits state courts to exercise personal jurisdiction over nonresidents who have “minimum contacts” with the forum state. “Minimum contacts” means the relationship between the nonresident and the forum state is such that the exercise of jurisdiction does not offend “traditional notions of fair play and substantial justice” under the U.S. Constitution's Fourteenth Amendment Due Process Clause.  (International Shoe Co. v. Washington (1945) 326 U.S. 310, 316.) The extent to which a California court can exercise personal jurisdiction over a defendant depends on the nature and quality of defendant's “contacts” with the state.

Under a “general” jurisdiction analysis (also called “all-purpose” or “unlimited” jurisdiction), nonresident defendants may be sued on causes of action unrelated to their activities within the state. (Perkins v. Benguet Consolidated Mining Co. (1952) 342 U.S. 437, 446-447.) General jurisdiction exists when a defendant is domiciled in the forum state or his activities there are substantial, continuous, and systematic. (F. Hoffman-La Roche, Inc. v. Sup. Ct. (2005) 130 Cal.App.4th 782, 796.) “In such circumstances, it is not necessary that the specific cause of action alleged be connected with the defendant’s business relationship to the forum.” (Id.) “The standard for establishing general jurisdiction is ‘fairly high,’ [citation] and requires that the defendant’s contacts be of the sort that approximate physical presence.” (Elkman, supra, 173 Cal.App.4th at 1315.) “Factors to be taken into consideration are whether the defendant makes sales, solicits or engages in business in the state, serves the state’s markets, designates an agent for service of process, holds a license, or is incorporated there.” (Id.)

Cross-Complainant Adam Jeremy Tenser has the burden to set forth facts required for general or specific jurisdiction. As Cross-Complainant fails to oppose the motion, he does not meet this burden. Conversely, the RBC parties demonstrate that this Court lacks general jurisdiction. According to the Second Amended Cross-Complaint (SACC), RBC is “a multi-national public company, traded on the Toronto Stock Exchange and New York Stock Exchange; and, at all times relevant is a Schedule I bank under the Bank Act of Canada, with principal offices at 200 Bay Street, South Tower, Toronto, Ontario, Canada.” (SAXC ¶ 10.) RBC does not have any branches in California and is not registered to do business in California. (Richardson Decl. ¶¶ 3-5.) Its head office is in Montreal, Quebec, Canada. (Id.) RBC does not have branches or a corporate registered agent for service of process in California. (Id. ¶ 6; Hosp Decl. ¶ 3.)

McKay is RBC’s President and Chief Executive Officer and Douvas is its Chief Legal and Administrative Officer. (Douvas Decl. ¶ 1; Richardson Decl. ¶¶ 9-10.) They are not domiciled in California, are not employees or officers of CNB, and are not members of CNB’s board of directors. (Id.) McKay and Douvas do not have an office in California. (Id.; SAXC ¶¶ 12, 14.)

RBC Bank is a separate National Banking Association organized under the laws of the United States with its principal business office in Raleigh, North Carolina. (Wren Decl., ¶ 3.) RBC Bank is also an indirect subsidiary of RBC, owned by RBC USA Holdco, which is owned by RBC Group Holdco. (Id.) RBC Bank does not have any branches in California. Day-to-day business of RBC, RBC Bank, and CNB is managed independently. (Id. ¶ 4.) Each bank also has a separate board of directors. (Wartburg Decl. ¶ 3.)

In 2015, CNB’s former parent company, City National Corporation, merged with RBC USA Holdco. (Richardson Decl. ¶ 5.) Upon the merger, CNB became a wholly owned subsidiary of RBC USA Holdco. (Id.) RBC USA Holdco is in turn owned by RBC Group Holdings, an LLC formed under the laws of the State of Delaware and headquartered in Toronto, Ontario. (Id.) However, the fact that a foreign corporation has an in-state subsidiary or affiliate does not subject the corporate parent to general jurisdiction in that state. (Daimler AG v. Bauman (2014) 571 US 117, 136;¿see also Young v. Daimler AG¿(2014) 228 Cal.App.4th 855, 866-867 [no general jurisdiction over parent corporation even if plaintiffs reside in state, accident occurred there, the vehicle was purchased there, and vehicle was manufactured by defendant's subsidiary].) CNB retained its name, has its own officers and board of directors, maintains its own corporate books and records, and has its own offices and employees. (Wartburg Decl. ¶ 3.)

Where general jurisdiction cannot be established, a court may assume specific jurisdiction over a nonresident, if the nonresident purposefully directed its activities at forum residents, or purposefully availed itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of local law. (Hanson v. Denckla (1958) 357 U.S. 235.) Specific jurisdiction involves a three-part test: (1) the nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or results from the defendant's forum-related activities; and (3) exercise of jurisdiction must be reasonable.”¿¿(Jewish Defense Organization, Inc. v. Sup. Ct. of Los Angeles County (1999) 72 Cal.App.4th 1045, 1054 [purposeful¿availment¿exists where a defendant performed some type of affirmative conduct which allows or promotes the transaction of business within the forum state].)

The RBC Parties lack the minimum contacts with California necessary for this Court to exercise personal jurisdiction. Again, Cross-Complainant does not oppose and therefore fails to meet its burden. None of the allegations involve any affirmative acts by the RBC Parties that were directed or took place in California. Instead, The SACC relies on an apparent theory of vicarious liability, ratification of City National Bank’s conduct, which allegedly impacted all commercial banking clients. (SACC ¶ 96.) On June 19, 2015, the Law Firm applied for a business line of credit with CNB. (SAXC ¶¶ 26, 47–52.) The Law Firm also applied for (and later entered into) a business overdraft line agreement with CNB on August 29, 2018. (Id. ¶¶ 33–35.) CNB wrongfully cancelled the Law Firm’s line of credit on January 25, 2019 and its overdraft line on February 19, 2019. (Id. ¶¶ 36–38, 72.) CNB deducted funds from the Law Firm’s account to satisfy an order from the California Franchise Tax Board (“FTB”), only to later return the funds, resulting in a state tax delinquency. (SACC ¶¶ 36–41.) CNB’s former outside counsel, also based in California, breached his privacy and threatened him. (Id. ¶¶ 15–18, 42–44.) Tenser pleads causes of action for fraud, extortion, violations of the federal Racketeer Influenced and Corrupt Organization Act (RICO), negligence, and violations of California’s Unfair Competition Law (UCL). (Id. ¶¶ 45–113.) The RBC Parties allegedly “authorized,” “fail[ed] to correct,” “indicate[d] a passive and indifferent attitude,” and “adopt[ed]” CNB’s fraudulent conduct as their own. (SAXC ¶¶ 69, 101, 103.) 

CNB parties’ evidence shows that there is no pervasive and continuous control over CNB’s day-to-day operations. CNB retained its name, has its own officers and board of directors, maintains its own corporate books and records, and has its own offices and employees. (Wartburg Decl. ¶¶ 2–3.) RBC Bank is headquartered in North Carolina, not California, and lacks any subsidiary relationship with CNB. The cross-complaint does not allege any California connected conduct by McKay or Douvas in their personal or professional capacities. Therefore, personal jurisdiction is not established.

As a separate basis to quash, cross-complainant fails to establish valid service on the foreign defendants. The proof of service shows that on March 8, 2024, the process server personally delivered the service documents to Raven Gero, Office of Jennifer Liu, Counsel, Royal Bank of Canada at 200 Bay Street, South Tower, 6th Floor, Toronto, Ontario, Canada M5J 2J5. However, Raven Gero is not an employee of RBC Bank, is not a designated agent for service of process for RBC Bank, or an officer, general manager, or a person authorized by RBC Bank to receive service of process. (Wren Decl., ¶6.) Raven Gero is a law clerk who works at RBC’s headquarters in Toronto, Canada. (Richardson Decl., ¶ 11.) Gero also is not an agent for, or authorized to accept service of process on behalf of, McKay and Douvas.

Accordingly, the motion to quash is GRANTED.